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 CHICAGO PENSION FACT SHEET

STATISTICS ON CHICAGO’S PENSION SYSTEMS

 All total, the five funds below hold the retirement life savings of 81,323 active city

employees and 56,843 retirees – a total of 138,166 people, none of whom receive

Social Security. The city estimates that the average retiree pension is just over $40,000.

retirement systemactive

workersretirees

average

annuity

 funded

ratio

Chicago Teachers’ Pension Fund 30,366 22,636 $46,440 53.9%

Firemen’s Annuity & Benefit Fund 4,740 2,821 $64,860 24.4%

Policemen’s Annuity & Benefit Fund 12,026 9,035 $56,892 31.3%

Municipal Employees’ Annuity and Benefit

Fund (e.g., health care workers, food/water

safety inspectors, library workers) 

31,326 19,614 $33,423 37.2%

Laborers’ Annuity & Benefit Fund (e.g., street

and sanitation workers) 2,865 2,737 $42,688 55.4%

 WHY ARE SYSTEMS UNDERFUNDED?

Chicago’s pension systems are diverse, but all suffer from essentially the same core problems.

•   Deliberate, Drastic Underfunding by Politicians: All systems have been deliberately

underfunded by politicians through inadequate employer contributions. This has led to

large, upcoming cliff payments for the teachers, police, and fire systems, meant to pay

off the pension debt accumulated from underfunding. In some cases, politicians

purposefully made little to no contributions to the system for the better part of a decade.

 As an example, this unwise underfunding drove down the Chicago Teachers’ Pension

Fund’s previously healthy funded ratio of 100% in 2001 to 54% in 2012.

•   Employer Contributions Not Based on Actuarial Science: The municipal and laborers

funds still feature an artificial employer funding formula based on a “multiplier.” The

multiplier has no relation to actuarial science that governs normal pension funding. The

other three funds also used this multiplier method for decades. This leads to

underfunding by design.

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 •  The Great Recession Brought on by Wall Street : Big banks and corporate CEOs on Wall

Street crashed the economy in the mid-to-late 2000s, hurting already-weak pension

funding levels. Now, many of these same big business leaders want to slash modest citypensions averaging around $40,000 -- even as the corporate elite plan to retire on six-

and seven-figure pensions.

•   Benefits Are Not the Problem: A commission assembled under the former Daley

 Administration found that the City of Chicago’s pension benefit levels “are comparable

to those of other cities, with the public safety funds at the low end and public service

funds near the average.” It also fund that “current benefits are not, in themselves,

unaffordable” and did not recommend cutting benefits for current employees because of

“uncertain legality and fairness.” Slashing pension benefits alone is unfair,

unconstitutional pension theft and will not fix the problem.

 WHO STANDS TO BENEFIT FROM PENSION “REFORM”?

•  Wall Street : Wall Street is angling to further benefit on the backs of public sector

 workers. The same bankers and billionaires now rallying to destroy defined-benefit

plans and push all workers into 401(k) plans also charged millions in fees for managing

investments for public pensions. In Rhode Island’s recent attack on pensions, the money

saved from gutting retiree income went to fees for Wall Street to manage the pension

investments in high-risk hedge funds; Wall Street won, but retirement security is

 jeopardized.

HOW CAN UNDERFUNDING BE ADDRESSED FAIRLY AND LEGALLY?

•   New Revenue Must Be Part of the Solution: Even the Daley commission admitted that

the City of Chicago will have to increase the amount it contributes. It states that “the

City of Chicago will have to contribute more,” implying that new, enhanced revenues are

necessary. It will take a serious commitment of new revenue to pay down the pension

debt owed to teachers, police, nurses, fire fighters, and other public employees and

retirees.

•  We Stand Ready to Work Together: The voices of working and retired men and womenshould be at the table when decisions are made about their retirement life-savings. We

stand ready to work constructively toward a solution that is fair, constitutional, and fixes

the real problem – a lack of revenue and chronically underfunded pension payments.